Bloomberg News

Niederauer Says Feedback on Deutsche Boerse Deal ‘Constructive’

June 01, 2011

June 1 (Bloomberg) -- NYSE Euronext has received “very constructive” feedback from European regulators on its agreement to merge with Deutsche Boerse AG, according to Duncan Niederauer, the chief executive officer.

“The tone’s been very, very constructive, and we’re on track for decisions in 2011 for sure,” Niederauer said yesterday in an interview at Bloomberg headquarters in New York. The owner of the New York Stock Exchange and NYSE Liffe derivatives market agreed in February to the $9.53 billion deal and won a victory last month when an unsolicited offer from Nasdaq OMX Group Inc. and IntercontinentalExchange Inc. was blocked by U.S. authorities.

More than $20 billion of stock-market mergers has been announced in the last seven months as exchange operators seek to expand revenue sources after profits fell in equity trading. Niederauer, whose deal with Frankfurt-based Deutsche Boerse would create the world’s biggest exchange company, said it’s too early to pursue major acquisitions in Asia.

“One of my takeaways from Asia is they want to be part of it, they just need time,” said Niederauer, who was in the region last month. “It’s going to be a while. I think it’s five to 10 years out. Most Asian exchanges have not demutualized yet and do not have a public currency.”

Among the eight largest publicly traded exchanges worldwide by market value, three are in Asia-Pacific countries: Hong Kong Exchanges & Clearing Ltd., Singapore Exchange Ltd. and Australia’s ASX Ltd. Venues elsewhere in the region are either government-owned or have yet to demutualize, or shift from member to shareholder ownership.

Japan, China

While equities listed in Japan and China have the second- and third-highest market value worldwide, the owners of their primary exchanges have yet to sell shares through an initial public offering. Tokyo Stock Exchange Inc. said March 10 that it will begin procedures for a public share sale. The two biggest exchanges in China are the Shanghai and Shenzhen stock exchanges. Both are overseen by the China Securities Regulatory Commission, which is a government agency.

Hong Kong Exchanges is the world’s largest listed exchange operator by market value at about $24 billion, according to data compiled by Bloomberg. The company posted its first annual profit gain in three years in March, as initial public offerings reached a record.

Failed Bid

A deal that would have united the exchanges in Singapore and Australia failed. While Singapore Exchange’s A$8.3 billion ($8.9 billion) bid for Sydney-based ASX in October marked the first agreement in a wave of exchange consolidation, the deal was blocked by Australian regulators in April. In rejecting the deal, Australian Acting Prime Minster Wayne Swan said it was a “no brainer” that the deal wasn’t in the country’s “national interest.”

NYSE Euronext, based in New York, and Deutsche Boerse agreed in February to merge. Even with the Nasdaq OMX-ICE joint bid withdrawn, NYSE Euronext’s deal faces a review from European regulators, who may take issue with joining the biggest derivatives businesses in the region.

In addition to combining the Eurex and Liffe markets within one company, the deal between NYSE Euronext and Deutsche Boerse would bring about 30 percent of European stock trading under common ownership, based on data compiled by Bats Global Markets. In the U.S. the company would own three equity options exchanges, giving it 42 percent of the volume, based on April’s figures compiled by Chicago-based OCC, which clears equity derivatives transactions.

Bid Withdrawn

Nasdaq OMX and ICE withdrew their joint $11.3 billion bid for NYSE Euronext on May 16 after the U.S. Justice Department threatened a lawsuit. An acquisition “would have substantially eliminated competition for corporate stock-listing services, opening and closing stock auction services, off-exchange stock trade reporting services and real-time proprietary equity data products,” the department said.

The combined NYSE Euronext-Deutsche Boerse entity will become the largest exchange company worldwide, trading or clearing 4.8 billion futures and options contracts last year, compared with CME Group Inc.’s 3.1 billion contracts, according to data from the Washington-based Futures Industry Association. The data include equity options in addition to futures contracts.

NYSE Euronext owners will meet July 7 about the deal, which requires 50 percent of their votes. Deutsche Boerse needs 75 percent of shareholders to approve it by July 13, according to a May 4 regulatory filing.

--Editors: Nick Baker, Joanna Ossinger

To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net; Nina Mehta in New York at nmehta24@bloomberg.net; Matthew Leising in New York at mleising@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.


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